Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260230 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018:1
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume (MPC) of 13 percent for the bottom 50% of the wealth distribution, but a flat 5 percent for the rest of the distribution. Households' consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.
Subjects: 
Capital gain
Dividend income
Consumption
Near-rational behavior
JEL: 
D15
E21
G12
Document Type: 
Working Paper

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